Ivor Royston is catching the opera tonight in Paris, and he has some reason to relax. The managing partner of San Diego’s Forward Ventures was in France as the press release hit the wire announcing his portfolio company, TargeGen, has been acquired by Paris-based drugmaker Sanofi-Aventis for as much as $560 million.
This deal, like many other acquisitions we’ve seen lately, will take time to prove its ultimate value rather than traditional deals that provide a one-time windfall. TargeGen’s investors will get a $75 million upfront payment and the total deal could be worth $560 million if TargeGen can hit a series of regulatory milestones, Royston says. Those milestones are key for determining just how successful TargeGen will be financially, since it has raised $118 million since its founding in 2001, according to CEO Peter Ulrich. The group of investors includes another San Diego firm, Enterprise Partners Venture Capital.
By acquiring TargeGen, Sanofi-Aventis is getting one of the leading companies pursuing a hot target in biology known as JAK2. This is a marker on cells found to be proliferating out of control in patients with blood disorders, known as myeloproliferative diseases. Other companies, like Incyte (NASDAQ: INCY) and Novartis, as well as AstraZeneca, are pursuing the target. What TargeGen has is a drug that’s supposed to be more selectively targeted to JAK2, and not related targets, which could make it a more potent drug against the disease, while avoiding broad suppression of a patient’s immune defenses, Ulrich says. Data from the 59 patients in a clinical trial of myelofibrosis were presented last December at a meeting of the American Society of Hematology.
The Sanofi deal “is a sign that hard work and skilled people can achieve an important result, even in hard times,” Ulrich says.
For Forward Ventures, the TargeGen sale is the first meaningful cash-out of an investment since about 2007, Royston says. “It’s an important exit for us,” he says, adding that the possibility of a five-fold return is high because the milestones are based on clinical development goals, not sales goals, Royston says.
TargeGen has 11 employees in San Diego, and their roles with Sanofi-Aventis are still to be determined, Ulrich says. Both he and Royston reminded me of a story Bruce wrote here in March about how TargeGen was able to discover its lead drug candidate, TG101348, in-house, and was able to bring it into clinical trials in 18 months with the help of a China-based contract research organization, WuXi Pharmatech. Two years later, the company had proven the concept with data from a mid-stage clinical trial that paved the way for today’s acquisition. Now it will be up to Sanofi to see just how lucrative this drug might be for investors, and valuable it may be for patients. Incyte may reach the market first in this category, Royston says, but he says the TargeGen drug could be the ultimate winner.
“This has potential to be a best-in-class compound,” Royston says.